! would agree that no seller agent or mortgage broker can guarantee that the house will appraise at the sale price. Unfortunately appraisals of lately often have come in lower the sales price , due in part to lower priced sales in the past 6 -8 months and appraisals are not keeping up. Add the fact that there is such a low inventory of product , you have bidding wars and homes are selling for well over asking. With eager buyers in the market that can make up the difference with a low appraisal, with their own monies, it is a seller's market.
If you believe there is something suspect about the agent's intentions, you should likely go with those feelings and chart your own course. What's wrong with going with your choice first...then if things don't work out try their recommendation?
There's a big difference between providing people with good options and applying pressure to make a guided decision.
They can guarantee by writing a clause to the contract to the effect of: if you use their lender, and the appraisal is low, they'll sell it to you for the lower price, or they'll pay you some amount of money. That's a guarantee.
But, Madison, you have to grow some scales here. New York is a pushy place. If you want something, you have to push. Do you have a particular fondness for your lender? If so, then turn the tables -guarantee to the seller that if the appraisal comes in low, you'll make up the difference in cash.
All the best,
Appraisers are like historians. They look at what other similar properties have sold in X time in Y radius with comparable features. There's no set rule for X or Y. Nor are there standard values for adjustments (how much does a half bath add? how much does a garage?) Based on what has sold, an appraiser will make a best guess for what a current home may fetch.
Real estate agents on the other hand are like fortune tellers. We are projecting what we think something will fetch in the future. We extrapolate value by trying to identify trends and patterns heading in a given direction.
I would personally be wary of anyone who tries to restrict your ability to choose any vendor. That's a violation of the National Association of REALTORS' Code of Ethics.
Often times a developer or a real estate agent selling a property will want the purchaser to use a bank that they know. Usually this is NOT because they are trying to do anything unethical, but more so because they know that the banks they work with are not going to mess things up! Sometimes a mortgage banker can make an error that loses the buyer the mortgage and/or the deal when the buyer actually should have gotten the loan. Similarly, sometimes an appraiser can come into a property and if they do not know the area or lack experience, they may not see or know the actual and/or theoretical value of a property.
Most appraisers do a very good job, however, sometimes an appraiser can get a reputation as being difficult or even incompetent. I would think that what is happening here is the seller's way of insuring that the appraisal will be done by a competent appraiser who knows the market in that area.
This all being said, nobody can guarantee with 100% certainty that a house will appraise (unless you are stealing the house!). Some are easier than others and maybe you can be 99% certain, but not 100%. I would suggest you have the agent furnish you with comparable sales in the area that would justify the sales price that you are paying. Keep in mind that even if there are no comps, it does not mean the house is worth less. If you did not think you were getting a decent deal you would not even be considering the house! As a matter of fact, they may be able to find 10 people like you willing to give the same offer as you... still... that fact alone does not guarantee that the house will appraise, but it does indicate that the property is priced correctly for the market and buyers are going to want it.
We cannot tell you what to do but you have to ask yourself... how good of a deal am I getting? and how badly do I want this property? If you feel it is a good deal and you want it then you should be flexible and accommodate if you have to. In the end you will be having an attorney represent and protect your interests and the fact of the matter is that in most cases like this there is nothing being done illegal, it is all for the sake of having a smooth transaction. Only you can decide if you should walk away or not.
Keep in mind that if you wanted to you can put in an application with both banks and then when you are ready to close you can go with the one that gives you the better deal in the end. The only catch there is that you would have to pay for two appraisals.
If you wanted to discuss this with you further, you can contact me direct any time. Good luck!
Mitchell S. Feldman
Associate Broker/ Director of Sales
Madison Estates & Properties, Inc.
Office: (718) 645-1665/ Cell: (917) 805-0783
But a few days later, they all but insisted that I use their lender.
Even those propositions titled Gauarntees are accompanied with a waterfall of words that mean all things EXCEPT Gaurantee. So, if we wish to use Gauantee accompanied with a 'waterfall of words' them absolutely it can be 'GUARANTEED!"
I make a really, really awesome Coca Vin. My mother said so. Can it be gauranteed YOU will like it?
This is what we are dealing with.
If you are packing lending paper from Bank of America, Chase, Citi or Wells Fargo, these lenders will use an appraisal service that may be located a gazillion miles from where you home is located. The aprriasal these banks order to be competed is for the purpose of reselling the morgage! You have apparisers who do not know the local market AND counter-intentioned directives to the appraiser. The outcome is a predictably LOOOOOWWWWW fiat apprased value.
Using a local lender or even the agents recommended lender provides a better assurance of an appraised value that is not counter-intentioned.
There are no Gaurantees in life. If you are making your decison based on a promised gaurantee, you really need to regroup.
Did you write...."my choosing to use another lender could cause him to look at other offers on the house. And this home is in a hot market right now. Should I walk away from this?"
What does your agent advise?
Now, have a meet up with the real estate professional you hired. This IS what they are being paid to counsel you about.
Best of success,
Annette Lawrence, Broker/Associate
Remax Realtec Group
Palm Harbor, FL
No. No seller can guarantee that it will appraise for enough. Impossible.
However, investors want to be in control, for a very good reason. They know the people they're dealing with. They don't know someone you might choose. And--ask any Realtor--lots of deals have blown up because the buyer sees what looks like a better deal on the Internet from some lender no one's ever heard of thousands of miles away. Then, when it comes time to deliver, that lender fails.
The same goes for appraisers, especially if the property is a rehab. Suppose the rehabber bought the property for $200,000. Assume it was a bargain price. The rehabber put $40,000 into the rehab. It's now on the market for $350,000. Some appraisers will do what they're supposed to do--look at the comps and determine whether the house is worth $350,000. Others will start analyzing the deal--the purchase price, the amount of the rehab--and come back with an appraisal of, say, $295,000. Understand: The house is fully worth $350,000. That's what the investor fears.
Investors want to use title companies they know and have worked with, too. Ask any Realtor: Title companies range from excellent to poor. They all claim to provide the same service. They don't.
Look: Have a home inspector look at the house. You've already done your due dilligence on the lender. Look at the comps yourself. If everything looks OK, do as the seller requests. Otherwise, understand that you will lose the house.
Hope that helps.